Medical Device Manufacturing
Medical Device Manufacturing
Business Model Description
Invest in B2B or B2C models engaged in manufacturing of medical devices or for scaling up an existing facility to cater to local and export demand. The medical devices could include Respirators, Monitors, Ventilators, and allied instruments, Personal Protection Equipment, Dental Veterinary Instruments and Appliances, Orthopedic Appliances, X-Rays, Radiography/ Radio Therapy Apparatus, Dialysis Machines and the like. Examples of active initiatives and companies in this space are:
GISD Alliance is a group of 30 high-powered business leaders from all over the world. In April 2021, Medical Device Development Centre was pitched by GOP to GISD Alliance for investment as a joint venture. Although local manufacturing is limited but can be scaled up as a necessary upgrade from the traditional surgical industry. (13)
PharmEvo, started in 1999, is a company in the business of developing, manufacturing and marketing high-quality products. Driven by its core values, PharmEvo has started Socially Responsible Marketing in Pakistan. With 20+ medical devices produced locally and other ventures in healthcare sector by PharmEvo, the company exports to 15 countries. (14)
Expected Impact
Increase penetration of healthcare delivery at by improving domestic manufacturing and distribution of medical devices and equipments.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Pakistan: Punjab
- Pakistan: Punjab
- Pakistan: Punjab
Sector Classification
Health Care
Realizing the need to reduce poverty using Universal Health Cards (UHC), Government has increased spending on health sector in 2020 and 2021. As UHC uptake increases, demand for more hospitals and medical devices will also increase. Surgical instruments already contribute to Pakistan’s exports; thus, export of medical devices can also help in reducing the current account deficit. (1)
Policy priority
Pakistan Strategic Trade Policy Framework (STPF) 2020-2025 is a comprehensive document that narrows down sectors for trade and manufacturing in "developmental" and "traditional sectors". The policy proposes interventions as well as incentives to improve the surgical instrument, medical device and pharmaceutical sector and increase its export potential. (2)
Gender inequalities and marginalization issues
COVID-19 pandemic has exposed vulnerable populations disproportionately, severely affecting women's and girls’ health especially access to essential health services. (3) Due to floods 2022, 650,000 pregnant women faced challenges in getting access to maternal services, while nearly 4 million children lacked access to health services. (4)
Investment opportunities
There are 60 health sector projects in PSDP 22 to the tune of a total cost of USD 480 million. Total foreign funding share for health sector in this year’s PSDP FY22 is 4.4 percent, suggesting that the health sector will expand and create many opportunities for private sector investments. (5)
Key bottlenecks
Financing gap has remained one of the biggest bottlenecks in the growth of the sector as public sector expenditure has not reached its optimum levels. Currently, public sector expenditure is 1.2 percent of the GDP. (6) As per estimates, with 100 percent UHC, the gap is USD 3.1 Billion. (7)
Medical Technology
Development need
As healthcare distribution includes sale, purchase of pharmaceutical products and medical equipment to hospitals, pharmacies, and physicians, the need for development of medical equipment industry is high. This need is driven largely by rates of insurance, pharmaceutical spending, illness, and demographics. (2)
Policy priority
Pakistan STPF 2020-2025 highlights manufacturing of medical devices as one of its priorities due to the high import cost of such devices and equipment. (6) In 2019, Pakistan imported USD 14 million worth of ventilators and USD 24 million worth of respiration apparatus. (8) The policy, therefore, recommends 'make in Pakistan' approach to reduce import bill and support the healthcare industry.
Gender inequalities and marginalization issues
Out of 13.5 million women that contribute 20 percent to the total workforce in Pakistan, jobs of ~50% of them are unpaid and unrecognized. (9) Furthermore, in Punjab, overall 44 percent employees are unregistered (2016) (10). Thus, it is difficult for such women and vulnerable employees to get equal wages, better employment contracts and training opportunities.
Investment opportunities
In terms of medical device manufacturing, the opportunity is products like Respirators, Monitors, Ventilators and allied instruments, Appliances, Orthopedic Appliances etc. In Pakistan, medical devices of such nature are imported and due to high cost of imports and from interventions proposed by STPF, devices are suggested to be developed in Pakistan. (11)
Key bottlenecks
In Pakistan, investors face regulatory risk (high compliance to regulations), lack of transparency, weak contract enforcement and difficulty finding reliable local partners. (12)
Medical Equipment and Supplies
Pipeline Opportunity
Medical Device Manufacturing
Invest in B2B or B2C models engaged in manufacturing of medical devices or for scaling up an existing facility to cater to local and export demand. The medical devices could include Respirators, Monitors, Ventilators, and allied instruments, Personal Protection Equipment, Dental Veterinary Instruments and Appliances, Orthopedic Appliances, X-Rays, Radiography/ Radio Therapy Apparatus, Dialysis Machines and the like. Examples of active initiatives and companies in this space are:
GISD Alliance is a group of 30 high-powered business leaders from all over the world. In April 2021, Medical Device Development Centre was pitched by GOP to GISD Alliance for investment as a joint venture. Although local manufacturing is limited but can be scaled up as a necessary upgrade from the traditional surgical industry. (13)
PharmEvo, started in 1999, is a company in the business of developing, manufacturing and marketing high-quality products. Driven by its core values, PharmEvo has started Socially Responsible Marketing in Pakistan. With 20+ medical devices produced locally and other ventures in healthcare sector by PharmEvo, the company exports to 15 countries. (14)
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
15% - 20%
The medical devices market in Pakistan is estimated at USD 500 - 600 million (15)
Market size for medical devices is estimated to be USD 500 - 600 million, growing at a CAGR of 15 percent during 2019 to 2023. The Government of Pakistan (GOP) spent about USD 785 million on healthcare during the fiscal year ending June 2021. (15)
Indicative Return
20% - 25%
The estimated IRR is based on a feasibility study for medical device development centers.
As per stakeholders in Punjab consultative session, Punjab's Sialkot Gujranwala cluster has skilled labor and basic technical capabilities for adding value to such businesses, and thereby generating a greater return of up to 25 percent IRR. (13)
Investment Timeframe
Short Term (0–5 years)
As per experts' consultations with Healthcare Device Association of Pakistan (HDAP), two years' time frame (year one construction and year two operations) is required to break-even in a medical device manufacturing business.
Pakistan's medical devices market is expected to grow at 5 percent CAGR during 2019-2023. (15)The global medical devices market is projected to grow from USD 495.46 billion in 2022 to USD 718.92 billion in 2029, at a CAGR of 5.5 percent during 2022-2029. (16)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Market - High Level of Competition
Impact Case
Sustainable Development Need
Medical device disposal is a significant issue in Pakistan; generally carried out through incineration in the EU, it typically releases nitrous oxide, as well as known carcinogens including polychlorinated biphenyls, furans and dioxins. Some of the strategies implemented by manufacturers to reduce waste matter destined to incineration include sterilization and reprocessing.
The need is to orient the design of devices on creating a simple, repeatable interface between two component sections to improve functionality or efficacy. As reducing waste and harmful emissions continues to exert businesses and governments globally, the medical devices industry can also contribute.
Effective environmental sustainability in the sector cannot exist without a full view of product life cycle from development, material selection, design, engineering to manufacturing, packaging, transportation, sales, use, and end-of-life disposal. (18)
Gender & Marginalisation
Traditionally women in Pakistan have restricted access to medical and health facilities, increasing their risk of diseases and illnesses. Issues that constrain women's access to healthcare services range from limited autonomy in households, lack of participation in financial decision-making, social disapproval of unassisted travel and long travel time to access medical facilities.
In the healthcare sector, there is also a "motherhood gap" where there is an increase in part-time employment among women of child-rearing age in Pakistan. The gender pay gap increases significantly at ages when women and men begin having children. (18)
There is a need to increase job opportunities for women within the healthcare sector, especially in higher positions and to present them with better and more flexible contracts. As of 2021, men dominate all top positions, while women take up part-time work in the sector. Overall, as of 2021, women constitute only 23.3 per cent of the workforce. (19)
In Pakistan, men are overrepresented in the healthcare profession and in semi-/low-skilled non-health fields. Women are more likely than men to occupy semi-/low-skilled healthcare related jobs such as playing the role of support and personal health and care workers and their representation in this semi/low-skilled space is 15 per cent or more than that of men (19)
Expected Development Outcome
With development of aftersales services and repairs, sustainable solutions like reuse and recycle can be introduced.
With adequate protective gear for workers, air and water treatment plants installed in the manufacturing units and centers, investments can be made sustainable.
Gender & Marginalisation
Healthcare sector and specifically, the IOA have a dual impact on gender equality as it can contribute to generating improved job opportunities for women and promise them increased access to medical facilities.
Primary SDGs addressed
12.4.2 (a) Hazardous waste generated per capita; and (b) proportion of hazardous waste treated, by type of treatment
In 2015, Pakistan was party to four international agreements on hazardous waste. From 2015 to 2020 on two agreements country's performance was 100% while the performance decreased to 25 percent from 50 percent in Stokholm and improved in Rotterdam convention to 70 percent from 64 percent. (20)
The target levels of compliance of four conventions on hazardous waste was set at 100% compliance. (Rotterdam, Stockholm, Montreal Protocol and Basel Convention) (20)
9.2.1 Manufacturing value added as a proportion of GDP and per capita
9.3.1 Proportion of small-scale industries in total industry value added
On SDG 9 manufacturing value added (MVA) as a proportion of GDP slightly reduced to 12.23 from 13.56 percent between 2015-20 at the national level. Though MVA declined, manufacturing employment as a proportion of total employment remain unchanged at 15 percent during 2015-19 at the national level. This proportion significantly decreased by 7% in Balochistan from 11 to 4 percent during 2015-19. (20)
The proportion of small-scale industries in total industry value added increased to 10.50% in 2019-20 from 8.40 percent in 2014-15, despite the overall negative effects of COVID-19 in 2019-20. (20)
The national vision 2025 and voluntary national review, strategic trade policy framework considers increase of value-added manufacturing important for Goal 9 but do not provide a specific quantifiable target. (21)
The national vision 2025 and Strategic Trade Policy and Voluntary National Review consider increase in small scale industry proportion as an important metric of development but do not provide a specific quantifiable target. (21)
5.5.2 Proportion of women in managerial positions
The percentage of women in managerial positions has increased from 2.70 percent (2014) 4.53 percent in 2019. (20)
The National Vision 2025 by Government sets the target of increasing women labor force participation from 24 to 45 percent by 2025 but does not give a specific target of increasing their presence in managerial positions. (21)
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Absence of regulations may encourage malpractices such as underpayment to employees, poor working conditions, among others.
Absence of regulations may still exclude women from obtaining gainful job opportunities with the right remuneration.
Unless manufacturing units achieve economies of scale, they will not be able to compete with low-cost imported products.
Impact Risks
Impact of reuse and recycling may not be clearly seen or adopted if business model does not have a recycling unit and offers after sale services.
There is a risk of exclusion if issues that hinder women's participation like transport, safe environment and flexible contracts are not addressed.
Impact Classification
What
Affordable healthcare equipment reduces the cost of healthcare delivery thereby making it accessible to underserved communities.
Who
The IOA impacts the existing cluster in Sialkot and gives an opportunity to manufacturers of medical devices to generate higher revenues.
Risk
Unless manufacturing units achieve economies of scale, they will not be able to compete with low-cost imported products.
Contribution
The business model contributes to reduced cost of surgeries, diagnostics and medica l procedures hence reducing health expenditure.
How Much
Expected yet gradual import substitution from imported medical equipment and devices market of USD 500 million. (22)
Impact Thesis
Increase penetration of healthcare delivery at by improving domestic manufacturing and distribution of medical devices and equipments.
Enabling Environment
Policy Environment
Strategic Trade Policy Framework (STPF) 2020-2025: The framework suggests incentives and Interventions specific to medical devices, and pharmaceuticals as a sector requiring development efforts. A special recommendation proposed is to increase in labor and enterprise productivity. (6)
The framework has already resulted in the completion of intervention regarding training in technology upgradation and its capacity building, enhanced market access, innovation-driven exports, product diversification and value addition. (6)
Financial Environment
Financial incentives: Refinance Scheme for Working Capital Financing of Small Enterprises and Low-End Medium Enterprises. A credit equal to 100% of the investment may be available to both Pakistani and foreign investors when the minimum investment is at least USD 175,000.
In case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises. (24)
Regulatory Environment
Medical Device Rules by Drug Regulatory Authority of Pakistan, state the registration process of medical devices as well as the relevant processes to import medical devices to Pakistan. (23)
The European Union Medical Device Regulation (MDR)/Regulation (EU) 2017/745 (EU MDR) entered into force on 26th May 2021, impacting manufactures which were previously exempt from medical device regulation. The new regulations will be fully implemented from May 2024.
Marketplace Participants
Private Sector
Corporates: PharmEvo, Alison and Surgicon limited Investors: Evercare, JS Bank, Cordoba Ventures, Glowfish Capital in Heath care "
Government
Drug Regulatory Authority of Pakistan and Ministry of National Health Sciences, Reseach and Coordination
Multilaterals
International Labor organization, Asian Development Bank, World Bank, Islamic Development Bank
Non-Profit
Healthcare Device Association of Pakistan, Surgical Instrument Manufacturing Association of Pakistan, Overseas Chambers, Federal and Provincial Chambers of Commerce and Industries.
Target Locations
Pakistan: Punjab
Pakistan: Punjab
Pakistan: Punjab
References
- (1) Finance Division. 2021. “Health and Nutrition.” Pakistan Economic Survey 2021-2022. https://www.finance.gov.pk/survey/chapters_21/11-Health.pdf.Accessed 28 March 2023.
- (2) Ministry of Commerce. 2021. Strategic Trade Policy Framework (STPF) 2020-2025. https://tdap.gov.pk/wp-content/uploads/2022/01/STPF-2020-25-1.pdf.Accessed 28 March 2023.
- (3) World Economic Forum. 2022. “Access to Healthcare: Why We Need to Prioritize Women and Girls.” https://www.weforum.org/agenda/2022/05/access-to-healthcare-prioritize-woman-and-girls/.Accessed 28 March 2023.
- (4) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 28 March 2023.
- (5) BOI (Board of Investment). https://invest.gov.pk/node/1678.Accessed 28 March 2023
- (6) Ministry of Commerce. 2021. Policies. https://tdap.gov.pk/wp-content/uploads/2022/01/STPF-2020-25-1.pdf.Accessed 28 March 2023.
- (7) UNDP (United Nations Development Programme). 2021. “Sustainable Development Goals Framework For Sindh.” https://procurement-notices.undp.org/view_file.cfm?doc_id=277185#:~:text=As%20the%20first%20step%20towards,Decent%20Work%20and%20Economic%20Growth.Accessed 28 March 2023.
- (8) WITS, Therapeutic respiration apparatus; ozone, oxygen, aerosol therapy apparatus; artificial respiration or other therapeutic respiration apparatus imports by country in 2021. https://wits.worldbank.org/trade/comtrade/en/country/ALL/year/2021/tradeflow/Imports/partner/WLD/product/901920.Accessed 28 March 2023.
- (9) UNDP (United Nations Development Programme). 2021. “Womenomics Women Empowering the Economy.” Development Advocate Pakistan, Special Edition, March 2021. https://www.undp.org/pakistan/publications/womenomics-women-powering-economy-pakistan.Accessed 28 March 2023.
- (10) Ethical Trading Initiative. 2019. Labour Standards in Pakistan’s Surgical Instruments Sector: A Synthesis Report. https://www.ethicaltrade.org/sites/default/files/shared_resources/Labour%20standards%20in%20Pakistan’s%20surgical%20instruments%20sector_2.pdf.Accessed 28 March 2023.
- (11) International Trade Administration. 2022. “Pakistan - Country Commercial Guide Health Care and Medical Equipment: Investment Opportunities.” https://www.trade.gov/country-commercial-guides/pakistan-healthcare-and-medical-equipment.Accessed 28 March 2023.
- (12) Export.gov. 2019. “Healthcare Resource Guide: Pakistan.” https://2016.export.gov/industry/health/healthcareresourceguide/eg_main_108609.asp.Accessed 28 March 2023.
- (13) Daily Times. 2021. “Pakistan a Key Partner in Current $400 billion Global Medical Device Industries: Chairman FPCCI.” https://dailytimes.com.pk/744773/pakistan-a-key-partner-in-current-400-billion-global-medical-device-industries-charmin-fpcci/.Accessed 28 March 2023.
- (14) Pharmevo. 2022. “Global Presence.” https://pharmevo.biz/global-presence/.Accessed 28 March 2023.
- (15) International Trade Administration. 2022. “Pakistan - Country Commercial Guide Health Care and Medical Equipment: Investment Opportunities- Overview of Industry.” https://www.trade.gov/country-commercial-guides/pakistan-healthcare-and-medical-equipment.Accessed 28 March 2023.
- (16) Fortune Business Insights. 2022. Medical Devices Market Size. Share COVID-19 Impact Analysis. by Type. by End-user. and Regional Forecast 2022-2029. Market Research Report. https://www.fortunebusinessinsights.com/industry-reports/medical-devices-market-100085Accessed 29 March 2023.
- (17) Global Value Chains. “Linking Economic, Social and Environmental Development.” https://gvcc.duke.edu/wp-content/uploads/PakistanMedicalDeviceGVC.pdf.Accessed 28 March 2023.
- (18) I’ons, G. 2021. “ Driving Sustainability in Medical Device Production.” Healthcare. https://healthcare-digital.com/medical-devices-and-pharma/driving-sustainability-medical-device-production.Accessed 28 March 2023.
- (19) WHO (World Health Organization). 2022. “The Gender Pay Gap in the Health and Care Sector a Global Analysis in the Time of Covid-19.” 13 July 2022. https://www.who.int/publications/i/item/9789240052895Accessed 29 March 2023.
- (20) Federal SDGs Support Unit. 2022. Pakistan’s Voluntary National Review 2022. https://www.sdgpakistan.pk/uploads/pub/VNR_2022_Pakistan_Report.pdfAccessed 29 March 2023.
- (21) Ministry of Planning Development and Reform. 2014. Pakistan 2025. https://www.pc.gov.pk/uploads/vision2025/Pakistan-Vision-2025.pdfAccessed 14 April 2023.
- (22) International Trade Administration. 2022. “Pakistan - Country Commercial Guide Health Care and Medical Equipment: Investment Opportunities- Impact to economy.” https://www.trade.gov/country-commercial-guides/pakistan-healthcare-and-medical-equipment.Accessed 28 March 2023.
- (23) Drug Regulatory Authority of Pakistan. 2022. “Medical Devices Establishment Licenses.” https://www.dra.gov.pk/therapeutic-goods/licensing-and-inspections/medical-devices-establishment-licenses/Accessed 28 March 2023.
- (24) BOI (Board of Investment). 2021. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1 Accessed 28 March 2023.
- (25) SMEDA. “Surgical and Medical Instruments-Prefeasibility 2023”. https://smeda.org/index.php/business-facilitation/smeda-downloads/pre-feasibility-studies/category/145-health-and-medical.Accessed 28 March 2023.